Jordan draws in Chinese investment

Chinese investors have signed up for involvement in several projects in Jordan since the beginning of September as the Jordanian government sees some success in diversifying investment sources.

Analysis

At the start of the China-Arab States Expo, which opened in the Chinese city of Yinchuan on September 11th, the Jordan Investment Commission chairman, Montaser Oqlah, said that Jordan was looking for its "fair share" of Chinese investment. Groundwork for some of the recently announced investments was completed prior to the event. Jordan's King Abdullah, who attended the opening of the expo, was able to announce over US$7bn in investment. Jordan became a founding member of the new Chinese-led Asian Infrastructure Investment Bank in February and China now seems ready to reward Jordan's support.

Investments by Chinese firms in Jordan that were agreed include the construction of a US$1.7bn, 900‑mw shale oil-fired (using local shale supplies) power plant in the Attarat area of southern Jordan, which will be developed by a consortium of Chinese companies and Jordan's Al Lajjun Oil Shale. China's Hanergy is to build a US$1bn, 1,000‑mw renewable energy plant, and the Aqaba Special Economic Zone Authority has signed an agreement with the Shenzen Chamber of Investment for the development of an industrial and logistics estate in Aqaba, which will be completed over the coming five years. Jordan's Ministry of Information and Communications Technology has announced a tie-up with a Chinese telecommunications firm, Huawei, and that China would invest in Jordan's planned national railway network, but it is not clear how advanced these plans are nor how they will be financed—for instance, through borrowing or operator licences.

Jordan has ambitious development projects aimed at spurring economic growth and staving off political unrest but its fiscal position is challenging and it has been struggling to get foreign direct investment (FDI) inflows back to pre-global financial crisis levels. Traditional Gulf Arab investors, who focused mostly on real estate, have proceeded with existing projects but have lost their appetite for major new ventures, with the downturn in oil prices suggesting that any recovery in inflows from this source could be slow to materialise. FDI inflows reached US$1.8bn in 2014, slightly above the 2010‑13 average of US$1.6bn, but still well below the annual average of US$2.9bn in inflows recorded in 2006‑09.

Impact on the forecast

These new deals support our current forecast of stronger inflows of foreign investment in the coming years.